OPEC divided as Saudi pushes for oil increase

By IBT Staff Reporter On 06/08/11 AT 6:40 AM

Saudi Arabia faced resistance on Wednesday from OPEC producers opposed to an increase in oil supplies that may help ease crude prices.

Under pressure from consumer countries to contain fuel inflation, Riyadh hopes to convince the Organization of Petroleum Exporting Countries to lift its production target by 1.5 million barrels a day at the meeting today, Gulf delegates said.

Riyadh has support from its Gulf Arab allies Kuwait and the United Arab Emirates to meet rising demand in the second half of the year.

But five countries -- long-time price hawks Iran and Venezuela plus Ecuador, Iraq and Angola -- have said they see no need to increase output.

All want to keep oil prices above $100 a barrel. Brent crude traded at $116 a barrel on Wednesday.

Iran and Venezuela are expected to provide the toughest opposition to an increase but Iran's acting oil minister Mohammad Aliabadi struck a conciliatory note at the start of the meeting.

Iran is a member of OPEC and will go with the decision of the majority, Aliabadi told reporters.

We do not agree with production being increased now, we must continue to consolidate balance in the market and we have to defend fair prices, Venezuelan President Hugo Chavez said on Tuesday in Ecuador.

As OPEC's biggest producer and the only one with any significant spare capacity, Saudi usually gets its way.

But it could be a close call.

Apparently backing the Gulf producers are Nigeria and Algeria who sit on a committee that has recommended a one-million-bpd increment.

That makes five for an increase and five against. Qatar, which has not spoken, would normally be expected to back its Gulf Arab allies. Libya's representative Omran Abukraa has yet to be spotted.

At a minimum, Gulf producers want to close the 1.4 million bpd gap between OPEC's two-and-a-half year old official production limit of 24.8 million bpd and actual output, estimated by OPEC in April at 26.2 million.

Beyond that, it will be up to Saudi Arabia to deliver more oil.

Regardless of the policy decision, Riyadh will pump more.

A Gulf official said Saudi was already raising output by at least 500,000 bpd in June to 9.5-9.7 million bpd.

Saudi output was last as high in the middle of 2008 after oil prices set a record $147 a barrel, shortly before recession sent prices crashing.

The numbers suggest more oil is required to stop oil prices rising again.

OPEC's Vienna secretariat is forecasting that demand in the second half of the year will be 1.7 million bpd higher than current cartel output.